It is not uncommon for leading stocks to pull back after breaking out. Ideally, volume is lighter when the stock retraces back toward a chart support area such as prior chart highs, an upward trend line, or a key moving average such as the 50-day moving average (DMA) line. Violations of those technical support levels are a concern, and they are a much greater concern when they occur on higher than average volume.  It is especially worrisome when the volume on the down day exceeds the above average volume which had accompanied the prior gains.

DXP Enterprises Inc (DXPE -$1.48 or -2.86% to $53.31) fell today on average volume and closed just beneath its 50-day moving average (DMA) line, raising concerns.  The 50 DMA and prior chart highs are critical support levels that chart readers should be watching carefully. Do not be confused by the 2:1 stock split which is expected to be effective as of 10/1/2008.  Additional deterioration would add more concerns and hurt its chances of making headway for the near-term, especially if higher volume should accompany any damaging losses. DXPE was first featured on Wednesday, August 06, 2008 in the CANSLIM.net Mid Day Breakouts Report (read here).  It made an impressive +31% sprint after its appearance with an annotated graph in this Featured Stock Update section on 8/26/08 under the headline "High-Ranked Machinery Firm Attracting Institutional Interest" (read here), but it has since surrendered that gain. In bullish market environments, adding to a successful breakout on the stock's first pullback to its 50 DMA is often a smart investing tactic, however in a poor market environment, any new buying efforts are discouraged.  Without a confirmed rally with a follow-through day and expanding leadership, the M criteria suggests that disciplined investors should stay on the sidelines.

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Often, when a leading stock is setting up to breakout of a solid base, it is highlighted in CANSLIM.net's Mid-Day Breakouts Report.  The most relevant factors are noted in the report which allows prudent CANSLIM oriented investors to place the issue in their watch list.  After doing any necessary backup research, the investor is prepared to act if and when the stock triggers a technical buy signal (breaks above its pivot point on more than +50% average turnover). In the event the stock fails to trigger a technical buy signal and its price declines then it will simply be removed from the watch list.

DXP Enterprises Inc (DXPE Unchanged or +0.0% to $51.87) remains quietly perched just -4% from its 52 week high.  It has been generally edging higher after a loss on 8/15/08 with heavier volume was a sign it was encountering distributional pressure as it reached its November 2007 highs. Its gain on 8/14/08 with twice average volume helped it hit a new 52-week high and rise above its pivot point, triggering a technical buy signal. It was first featured in yellow in the 8/6/2008 CANSLIM.net Mid-Day Breakouts Report (read here) as multiple gains including a 7/31/08 gap up helped it rise to the high end of a long choppy base and challenge its 2007 highs in the $53 area. The weekly chart below allows you to see that there is little resistance remaining due to overhead supply.  Its great annual earnings history and strong quarterly sales revenues and earnings increases satisfy the C and A criteria. The number of top-rated funds owning an interest rose from 17 in Sept '07 to 27 in June '08 helping satisfy the I criteria. It has only 3.78 million shares in its public float, and the very small supply of shares (the S criteria) outstanding can contribute to greater volatility in either direction if institutional investors rush in or out. 

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